Why are Corporate PPAs important for the Retail and Consumer sector?
Written By
Associate
UK
I am a commercial associate in our energy and infrastructure teams in London.
Corporate PPAs are becoming increasingly prominent for global businesses, driven largely by their environmental and economic advantages and are a valuable tool for Retail and Consumer businesses. These PPAs are particularly useful for businesses which are high consumers of energy – for example hotel chains, manufacturers and “big box” retailers, as they allow such businesses to purchase power on a long-term basis, directly from renewable energy generators without having to physically exist in the same location.
Corporate PPAs are becoming increasingly prominent for global businesses in the technology and communications sector, driven largely by their environmental and economic advantages. These PPAs allow corporate energy consumers to purchase power on a long-term basis, directly from renewable energy generators without being co-located.
By providing price certainty and long-term hedging against volatile power prices, Corporate PPAs are attractive to large power users who need a continuous and reliable supply, or have energy-intensive data centres which are becoming increasingly important in the current AI and blockchain boom. In 2023, it was these tech companies with hyperscale centres who dominated the market., Amazon was the biggest buyer globally, with 74 individual PPAs across 16 markets totalling 8.8 GW. Other tech companies with major clean power purchases in 2023 were Meta (3 GW) and Google (1 GW).
PPAs are becoming increasingly crucial due to the energy demands posed by AI. Sam Altman, the CEO of OpenAI has described powering AI as the “hardest part” in satisfying demand. This is because AI computing requires a large amount of energy which will only increase as AI models become more sophisticated and deal with larger data sets. Each search with OpenAI’s ChatGPT typically requires 2.9 Wh per request, almost 10 times the 0.3 Wh required for a Google search. As AI is increasingly integrated into our lives, PPAs will be vital for tech companies as the risk of price volatility and supply instability when obtaining energy on the open market could be colossal for data centre owners.
With many technology companies making ambitious ESG and net zero targets, such as Microsoft using 100% renewable energy by 2025 and Amazon by 2030, Corporate PPAs further enable them to source a significant proportion of their energy from renewable sources, thereby reducing carbon footprints and demonstrating commitment to sustainability targets.
Whilst it can be difficult for smaller companies to participate in PPAs due to the commercial effort and relative lack of bargaining power compared to tech giants like Amazon and Google, as existing PPA projects grow more sophisticated and the price of renewables drop, intermediaries are expected to offer aggregated offtake products to open the market up to the wider tech and communications sector.
Overall, PPAs are an important tool for businesses in the tech and communications sector to reduce their energy costs, increase sustainability, support the development of renewable energy and improve their sector’s resilience to energy disruption and volatility. Accordingly, the trend is likely to remain at the forefront of companies’ energy agenda as they work towards their net zero targets.
If you would like to find out more, please visit our Corporate PPA Hub or get in contact with us.
